Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Crown Castle International Corp. (NYSE:CCI) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Crown Castle International Corp. (NYSE:CCI) was in 38 hedge funds' portfolios at the end of December. CCI investors should pay attention to a decrease in hedge fund sentiment of late. There were 41 hedge funds in our database with CCI holdings at the end of the previous quarter. Our calculations also showed that CCI isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="aligncenter" width="400"] Cliff Asness of AQR Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's view the latest hedge fund action encompassing Crown Castle International Corp. (NYSE:CCI).
What have hedge funds been doing with Crown Castle International Corp. (NYSE:CCI)?
At the end of the fourth quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CCI over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the number one position in Crown Castle International Corp. (NYSE:CCI). Bill & Melinda Gates Foundation Trust has a $758.1 million position in the stock, comprising 3.5% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, with a $259.1 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions encompass Greg Poole's Echo Street Capital Management, D. E. Shaw's D E Shaw and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to Crown Castle International Corp. (NYSE:CCI), around 7.69% of its 13F portfolio. LDR Capital is also relatively very bullish on the stock, setting aside 4.84 percent of its 13F equity portfolio to CCI.
Judging by the fact that Crown Castle International Corp. (NYSE:CCI) has witnessed falling interest from hedge fund managers, logic holds that there lies a certain "tier" of money managers who were dropping their positions entirely last quarter. Intriguingly, Joe DiMenna's ZWEIG DIMENNA PARTNERS cut the largest stake of the "upper crust" of funds monitored by Insider Monkey, valued at about $10.1 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also said goodbye to its stock, about $6.4 million worth. These moves are interesting, as total hedge fund interest was cut by 3 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Crown Castle International Corp. (NYSE:CCI) but similarly valued. We will take a look at Colgate-Palmolive Company (NYSE:CL), Northrop Grumman Corporation (NYSE:NOC), Lloyds Banking Group PLC (NYSE:LYG), and Illinois Tool Works Inc. (NYSE:ITW). All of these stocks' market caps are closest to CCI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CL,52,2086840,7 NOC,44,1320442,-2 LYG,5,66676,-3 ITW,32,470691,-1 Average,33.25,986162,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $986 million. That figure was $1724 million in CCI's case. Colgate-Palmolive Company (NYSE:CL) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 5 bullish hedge fund positions. Crown Castle International Corp. (NYSE:CCI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. Hedge funds were also right about betting on CCI as the stock returned 8.2% during the first quarter (through March 11th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
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